Microsoft has released their 2009 summer update for the Xbox 360 console giving extra functionality such as avatar marketplace, user ratings for games and games on demand. Another update later this year will bring in more social features (twitter, facebook) but it's the Games on Demand feature of the current update that's the most exciting feature but also deserves a bit of discussion.

The Xbox has long had the ability to purchase and download older titles but the latest and greatest games never featured on this. Pricing was limited to Microsoft Points with people always wondering how much an item really cost (yeah it depends on how many points you purchase at a time). But these older classic and arcade games were never too pricey and often had that retro appeal inviting you to click the buy it now button.

But now the landscape has changed and as of 11 August 2009 you're able to purchase the latest released games directly online. Purchase, download and play. What could be easier? While it's definitely a good step forward there are some caveats which could hinder adoption.

Pricing:

I don't know why companies try to hide it but once you've got a digital copy of something the distribution costs to sell it are nowhere near that of a physical copy. No shelf space or shipping needed and with bandwidth getting cheaper and cheaper pushing the items out does not cost much. So why then do we often have to suffer at a digital copy costing almost as much, if not the same, as a physical item? Sadly Microsoft do exactly this.

In the UK store most of the games are priced at GBP19 but a physical copy can be had for less. Case in point, the digital copy of Assassins Creed is GBP19 from Microsoft but GBP15 from Amazon UK with free shipping. Granted you won't get near-instant1 satisfaction but you'll have saved 20% (GBP5) by taking it offline. And of course there are other benefits too...

Resale:

The second hand game market is huge and digital downloads are set to kill this. Of course the publisher despise the second hand market and love the fact that your digital copy is tied to you and only you. Forever. Only a small segment of the gaming market want games on release day, most don't mind waiting a while to get their hands on it. If you're willing to wait a few weeks longer you're often able to pick up a second hand copy of a game for a fraction of the price. Just look at some of the deals on ebay with many available for about GBP10.

Sell a few of your already completed games and you've made recouped enough to get another new game. And so the cycle of games continues. But your digital copy remains yours forever, and how many people go and play old games again? So the publishers get all the money and can rest easy knowing that they'll not make a loss.

Target audience:

So who exactly are Microsoft targeting here? I'm not sure as there must be a very small segment of the market that

have fast enough broadband connections,

sufficient storage on their Xbox,

don't want to wait for delivery from Amazon (or go to a store)

don't want to be able to resell the game at a later date

in some cases want to pay more for a digital copy than physical

And to be honest, I don't know of anyone who'd take it up. Do you?

The future

Whilst I might come across a bit negatively I do applaud Microsoft for this update as it is the start of an interesting future. Microsoft need to sit down and think this through a little more. There are so many ways to entice digital downloads (and thereby pleasing publishers). How about cheaper prices, extra free content.

Perhaps even shock the market and offer game rental where you would have access to the game for a predefined period (1 day, 7 days, 14 days etc). How awesome would that be? Something else to consider might even be a form of 'season pass' where you pay a set amount a month and get access to a catalogue of games which you can access anytime during the month.

Depending on your bandwidth as a 5GB download can take a mighty while. And if you happen to be stuck with an ISP like Virgin Media you'll be 'traffic managed' in no time. ↩